Waddell v. Traylor

• Decision Date: 25 January 1937
• Docket Number: 13979.
• Citation: 64 P.2d 1273,99 Colo. 576
• Parties: WADDELL et al. v. TRAYLOR.
• Court: Colorado Supreme Court

64 P.2d 1273

99 Colo. 576

WADDELL et al. v. TRAYLOR.

No. 13979.

Supreme Court of Colorado, En Banc.

January 25, 1937

Error to District Court, City and County of Denver; Robert W Steele, Judge.

Action by Annie S. Traylor against Braden Waddell and Grace A Waddell. To review a judgment in favor of the plaintiff defendants bring error.

Reversed and cause remanded, with directions.

Floyd F. Miles, of Denver, for plaintiffs in error.

Quiat, Ginsberg & Creamer, of Denver, for defendant in error.

YOUNG Justice.

A rehearing was granted in this case and our former opinion withdrawn. The following now is announced as the opinion of the court. Herein reference will be made to plaintiffs in error as defendants and to defendant in error as plaintiff.

Defendants bring the cause here to reverse a judgment rendered against them for an unpaid balance on a promissory note. They admitt he execution of the note of date November 9, 1931, for the named principal sum of $380, due six months from the date thereof, and payable in monthly installments, the first five to be $25 each and the final one in the amount of $255. The expressed rate of interest was 12 per cent. per annum from the date of the note, payment of which was secured by a chattel mortgage on household furniture and other property.

For a first defense defendants allege payment of an amount more than sufficient to satify the note, if they were charged only what they allege is lawful interest. A second defense alleges that upon the execution of a former note for $375, of which the note in suit is a renewal, they received from the plaintiff's assignor, one T. H. Traylor, since deceased, the sum of $300, that $75, balance of the expressed principal of the first note, was to be paid under the contract, to the said Traylor as additional interest or compensation for the use of the borrowed money. They further allege that said $75 is reflected in the amount of the note, the subject of the suit. If the note is valid and enforceable in accordance with its terms, the judgment is correct and should stand.

Defendants contend that at the time of the execution of the original note, said T. H. Traylor the payee, was subject to, but failed to comply with, the provisions of chapter 108 of the 1913 Session Laws of Colorado (page 400), regulating the loaning of money in this state. For a third defense it is alleged that Traylor was subject to, but failed to comply with, the requirements of chapter 93 of the 1917 Session Laws (page 350), relating to the loaning of money; and a fourth defense states that the interest charge demanded and contracted to be paid, was and is unconscionable and unreasonably oppressive. It is alleged further that plaintiff acquired the note and chattel mortgage after maturity with full knowledge of the equities of the defendants. The district court sustained a general demurrer to the second, third, and fourth defenses. On these rulings defendants assign error.

After the date of the execution of the note this court, in the case of Gronert v. People, 95 Colo. 508, 37 P.2d 396, held the Money Lenders Act (Session Laws 1919, c. 159, p. 524, sections 3781-3801, C.L.1921) to be unconstitutional. The 1919 act in express terms repealed chapter 108, Session Laws of 1913, and chapter 93, Session Laws of 1917, supra. Defendants contend that the attempted repeal of these laws by the act of 1919, which act was held unconstitutional in the Gronert Case, was ineffectual, and that our opinion left the acts of 1913 and 1917 standing as the law of this state. Plaintiff does not challenge the correctness of this contention. The two acts finally were repealed by chapter 157, Session Laws of 1935 (page 690), which became effective Before the complaint in this action was filed.

The plaintiff, while admitting that the attempted repeal in 1919 was void, contends that the 1913 act is unconstitutional; that its subject is not expressed in the title; that it is special or class legislation; and that interest may be charged at any rate upon which the parties to the transaction may agree, since there is no express declaration in the act that loans bearing interest exceeding the limitations therein specified shall be void. Defendants point out that notwithstanding there is no provision in express terms that interest exactments exceeding the specified rates shall void the note or be unenforceable as to such excess, there is a provision that treble the interest paid, if in excess of the rate specified, may be recovered by the party paying the excess, and that a violation of the provisions of the act shall be a misdemeanor. If the above-mentioned $75 be held to be interest on the note here involved, or as consideration for the use of the money, as it must be, the amount contracted for is greatly in excess of 12 per cent. per annum on the money actually loaned. This act of 1913 was Before our court in the case of Cavanaugh v. People, 61 Colo. 292, 157 P. 200, 201. With respect to the sufficiency of the title of the act, we said in that case: 'It would seem clear, therefore, that the title of this act, 'To regulate the business of loaning money,' would cover a provision concerning interest on money loaned. We are of the opinion that the title fully meets the requirements of section 21 of article 5 of the Constitution.' With respect to its being class legislation and unjustly discriminatory, we also stated:

'It is said, further, that the law is unjust and unreasonable because it exempts national banks, state banks, trust companies, building and loan associations, and title and guaranty associations, and does not apply to those who loan money at 12 per cent. or less, or who loan without security.

'The exceptions, however, appear to be reasonable, inasmuch as they cover only money lenders who are already subject to governmental supervision and control. Such exceptions have been held reasonable by the Supreme Court of the United States. Griffith v. Connecticut, 218 U.S. 563, 54 L.Ed. 1151, 31 S.Ct. 132.'

The provisions in the act, that treble the interest paid, if in excess of the rates specified, may be recovered, and that a violation of the act shall be a misdemeanor, amounts, we think, to a declaration of public policy that a contract for payment of interest in excess of the specified rate shall not be enforceable as to such excess, and this, notwithstanding section 3779, C.L.1921 (Sess.Laws 1889, p. 206, § 3), providing that 'The parties to any bond, bill, promissory note, or other instrument of writing, may stipulate therein for the payment of a greater or higher rate of interest than eight per centum per annum, and any such stipulation may be enforced in any court of competent jurisdiction in the state.' That the Legislature in 1889 did not see fit to place restrictions on the rate of interest to be charged, did not preclude it, in 1913, from making certain interest charges void or even criminal. In so far as the two acts are inconsistent, the later act must prevail.

It is apparent under the facts alleged in the answer in this case--the truth of which is admitted by the demurrer thereto--that to permit plaintiff to recover the interest claimed would allow a consideration for the use of the money received greatly in excess of rate fixed by the 1913 act as lawful, and would be equivalent to holding that plaintiff might enforce, through court proceedings, the payment of excess interest, the taking of which constitutes a misdemeanor. Courts will not lend their aid to the enforcement of terms of a contract which will result in the consummation of a criminal act, or one contrary to the public policy of the state. Cumberland Tel. & Tel. Co. v. Evansville (C.C.) 127 F. 187; Hill v. Cruce, 146 Ark. 61, 225 S.W. 11; Coppell v. Hall (Hall v. Coppell), 7 Wall. (U.S.) 542, 19 L.Ed. 244; Sharp v. Teese, 9 N.J.Law, 352, 17 Am.Dec. 479.

Section 1 of chapter 108, Session Laws 1913 (page 400), so far as here material is as follows: 'That hereafter it shall be unlawful, without first procuring the license hereinafter provided for, to engage in the business of making loans of money or of personal credit, on any security of any kind, direct or collateral, tangible or intangible, upon which there is directly or indirectly charged or received interest, discount or consideration greater than twelve per centum per annum. The foregoing prohibition shall apply to any person who by any device or pretense of charging for his services or otherwise seeks to obtain a larger compensation in any case hereinBefore provided for.'

Section 8 of the same chapter (page 404) provides in part: 'The phrase 'engage in the business of making loans' as used herein shall be taken to apply to and include every person who shall make any loan of money or of personal credit upon any security whatsoever where the rate of interest, discount, or consideration charged is greater than twelve per centum per annum.'

It is alleged in the answer that plaintiff's assignor was engaged in the business of making loans and that he had not procured the license required. Assuming this to be true, as we must, since the matter arises on demurrer, it follows that any interest or consideration charged for the loan in excess of 12 per cent. per annum is unlawful. Being unlawful, plaintiff cannot invoke the aid of the courts to enforce collection of such excess.

Since the act does not in...